 Now, we live in exciting times, no one dispute that, somewhat too exciting, you may say. Times when governments and societies are facing challenges that are meant. Increasingly, people feel let down by the establishment and use their most powerful weapon, namely the right to vote, to challenge the institutional frameworks established of the past 70 years. And in some cases, even the democratic principles on which they are based. Scottish and Brexit referenda in the UK elections in the United States, Holland and France, as well of course as the Catalan uprising recently, they are all examples I think for how the will of the people can shake even the most established democracies to the core. And in moments like this, the onus is not just on our elected politicians to provide honest arguments and feasible solutions. Now more than ever, global institutions like the IIEA, centres of political research, unconventional thinking and fearless debate, must enter the fray. And that's why I'm extremely grateful to the organisers of this event for inviting me to speak to you here today about the outcome of the recent elections in Germany. For journalists, it's easy to be slightly facetious about exciting times such as they are at the moment. For at least they certainly make for great headlines. Over the last 18 months, the front page showed Emmanuel Macron as a saint and Donald Trump as a devil and Brexit, well actually Brexit really never made it to the front page. So many colleagues in Hamburg are full of envy and think that foreign correspondents in France, the US and Britain have certainly a more exciting job than they do. Because let's face it, what we've seen here are what you might call Apollo moments. They are the kind of political moments when everybody remembers where they were at the time, or Princess Diana moments you might call them as well. The election in Berlin was no such moment, certainly not no. When the exit polls were released at 1700 hours on the 24th of September it more felt like a non-event. Angela Merkel re-elected as Chancellor, says the Reuters news agency that was hardly breaking news, that was just what everybody expected. The surprise was of course that the right wing AFD became the third largest party with 12.6% share of the vote. But on the whole, international observers have not been particularly alarmed about it and I think rightly so. I will say a lot more about the AFD later. For the moment I just want to highlight two figures that put the AFD success in the context of the overall result. The turnout was high, 76%, but of those 82% supported one of seven established parties on a finely calibrated scale around the political centre. In other words, unlike the British, the Americans, the French and the Dutch, German voters did not challenge the status quo. No matter how you look at it, the elections we saw in Germany were no political earthquake. And in a way that was what governments and civil servants in capital cities all over the world had hoped for. As a civil servant at the United Nations told me in September, Trump, Putin, Turkey, Brexit and the rise of right wing popular movement everywhere, the world has enough to deal with. Mrs Merkel is crucial for the success of Europe and ultimately for the survival of the liberal international order. In times of disruption, change and upheaval, the Germans voted for continuity and gave the world a sense of stability. While everything seems in flux, the Germans came out in support for the old order. If Germany's reputation for steadfastness and reliability has been tarnished by the scandal of the Volkswagen's diesel engines, the electorate probably sent a signal of overwhelming support for old certainties. Now, it's obvious why such a signal is very welcome. It suggests that there are still senior politicians in the center ground who are trusted enough to prevent the popular instinct to lurch to the right. So far, so understandable. But beyond that, it also creates enormous expectations about what Angela Merkel will be able to achieve in terms of the euro crisis, the future of Europe, relations with Moscow, Ankara and Washington, to name but a few of the most pressing international questions. Which of course all have a domestic side to them as well and they also need handling. In other words, to all those who see in Angela Merkel the leader of the free world, I can only say be warned, you're betting on the wrong horse. I don't want to talk too long now and leave as much time as possible for discussions afterwards. But I want to highlight a few issues domestically and internationally that Merkel's government is now faced with and try and predict as much as you can how successful she may or may not be in challenging them. Now, what are the options for a coalition government? Of course, in theory, Merkel could continue the grand coalition with the SPD, but only in theory. The social democrats led by former president of the European Parliament, Martin Schulz, suffered their worst result in living memory, 20.5%. We're not ready for government. We need to regroup, as senior party official told me afterwards. Now that leaves a constellation of Merkel's CDU, its Bavarian sister party CSU, colour code black, the liberal FDP, colour code yellow and the greens. Take the colours and you end up with the Jamaica flag, hence the Jamaica coalition. Now you can also be forgiven to think pirates of the Caribbean and you wouldn't be far off. The bunch of ministers in Angela Merkel's cabinet will be about as incongruous as Captain Sparrow's crew of buccaneers. And although Angela Merkel is staying on to captain her ship, her position is severely weakened. Because with 26.8% share of the vote, the CDU also got its worst result in living memory. 1.3 million voters abandoned Merkel in favour of the Liberals, 1.5 in favour of the AFD. And what that means, more than before, she will have to accept policy decisions which are heavily influenced by the various red lines drawn up by her various coalition partners. Forming a government is going to be anything but straightforward. And it will take time. A lot of time. Only this week they agreed to start preliminary discussions, the so-called sounding out phase. A date for the official begin of coalition negotiations has not been set and the official line in Berlin remains that a government should be in place by Christmas. Chances are that one of its most senior brief in the cabinet, that of the Finance Ministry, will be held by Wolfgang Kubicki of the SPD. And for those who have been hoping for a new momentum in reforming economic governance in the Eurozone in a way that would make the single currency sustainable in the long run, this is bad news. Emmanuel Macron proposes an ambitious reform that sees the creation of a Eurozone Finance Ministry with expensive powers over a separate budget and a European monetary fund to underwrite investment projects and increase spending in countries with high unemployment. While the Green Party may be fully supportive of such plans with the FDP in charge of Germany's finances, this idea is pretty much dead in the water. For the Liberals, a Eurozone budget which plugs deficit holes in smaller countries is quite simply out of the question as they put it. It invariably paves the way towards a transfer union where smaller countries see no need for fiscal discipline as Germany picks up the tab. Even a scaled-down version backed by Merkel so far, namely a small budget and a European monetary fund to help weaker economies carry out tough reforms will now be hard to achieve. And apart from the structural reform, there's also the immediate question of debt mutualisation. Here too, the Liberals will dig their heels in. Although there's been some encouraging news from coming out of Athens in recent months, such as growth figures in the first two quarters of the year, which actually were 0.7%, and overall growth for 2017 is projected at 2.1%, add to that the successful return in June to the international money market where the government rose raised 3 billion euros. While all of this is encouraging, national debt still stands at equipping 180% of GDP. And that's well over, on top of that, well over a fifth of Greece's adult population of working ages unemployed. And at 45% youth unemployment remains devastatingly high. Too high, that's pretty sure, for Prime Minister Alexis Tsipras to meet his side of the bargain in the latest EU and IMF bailout programme when it runs out in June. By that time, his creditors expect the Greek economy to reach a budget surplus of 3.5%. The FDP has made it clear that the best solution for Greece to get back on its feet will be, quote, a new start without the euro. When this timeout option was put on the table a few years ago and then dismissed, partly because of the enormous economic and social strains linked to the process of reverting to the drama, and partly because it was seen to put too big a question mark over the political commitment to the European project as a whole. Now both of these objections carry a lot less weight. And none of this bodes well for the Italian elections next spring either. At least that ratio stands at 130% of GDP. And you wonder whether Berlin can seriously propose a timeout scenario for the eurozone's third largest economy. Well, that seems unlikely. It is clear that the continued wrangling over the issue will only confirm the increasing skepticism among voters and encourage them to vote for the populist five-star movement. Now, of course, the whole question of the eurozone is inextricably linked to the future of Europe itself. And Macron made a point of talking about this immediately after the German elections. And he said that Europe was not a supermarket. That criticism was directed at Poland, Hungary, the Czech Republic and Slovakia, where these member states refused to accept refugees from Germany according to a newly introduced quota system. But for many Germans it showed that when put to the test, the great ideal of the European project, namely solidarity among the nations of Europe, is perhaps after all no more than a lofty ambition. So if you look into the future, the idea of Europe as a supermarket, by a much looser union driven by more natural self-interest than pan-European ideals, that idea is gaining more traction among the German public now. As I said, there is a long list of international policy issues that demand Berlin's attention. Trump, of course, the future of the transatlantic relationship, both in terms of trade, as well as security and nature. Germany's position vis-à-vis Russia and Turkey. But in the interest of saving time now, I want to leave that perhaps to the discussion afterwards. And maybe spend just a few moments talking about Brexit. There was disbelief, I guess, you could call it, among the British media, when in the main debate during the election campaign between Merkel and Schultz, Brexit wasn't mentioned once. There was a Twitter storm breaking out over that. But that pretty much sums up Berlin's attitude towards it. It is not something the government in Berlin is losing a lot of sleep over. After the initial shock of the referendum result last year, the general attitude towards Britain now pretty much is goodbye and good luck. Brexit has always said that German industry, especially motor manufacturers, would put pressure on Berlin to give Britain the sweetest possible deal. That hasn't worked out like that, not at all. Not least because of combative language and outright hostility towards Europe, which has generally taken people by surprise. And it also exposed the weakness of the British side, which essentially continues a domestic debate on the main stage of Brussels. As a result, as far as many Germans see it, the talk of no deal and walking away from the table are seen as empty threats. Few people in Germany are expecting WTO rules to kick in, especially since Theresa May loosened the initial time constraint of two years when she accepted the need for a transition period in her Florence speech. The only question Berlin is really interested in is how big a hole Britain's exit will leave in the EU budget. And that is why Berlin insists on the initial timeline agreed by David Davis for the British side and as a member of the Foreign Office said to me last week, I'm sorry the Brits are so upset, but the reason we insist on sorting out the divorce bill first before we move on to trade negotiations is simple. Protecting our interests, surely they must understand what that means. I'll leave it at that for the moment, I'm sure we'll return to the subject later. Now I want to move on to the challenges the Jamaica Coalition might face at home. And I think to fully understand the election result, it is worth remembering just how popular she remains. Even after 12 years in power, Merkel's approval rating stands at around 25%, which is extraordinary by any standard. And the main reason I think is the sense that she managed the German economy extremely well. As the economist put it recently, in Germany the living is easy. Since 2005, unemployment has fallen from 11.2% to currently 3.8%. Real wages have increased steadily and consumer confidence remains among the highest in the OECD countries. GDP growth is forecast to reach 1.9% this year and as a result the budget surplus is set to reach a record 28 billion euros, the highest since reunification. Such a solid performance would be welcome by any electorate, but it is worth remembering that the Germans are generally extremely fiscally conservative. This is after all the country which escaped the financial crisis 10 years ago relatively unharmed because it resisted the neoliberal banking model instinctively and where even in the climate of low interest rates people shy away from borrowing money. In other words, as far as many Germans are concerned, Angela Merkel still personifies all those conservative virtues for fiscal prudence that Theresa May likes to invoke, perhaps less successfully. At the same time, Merkel acknowledged early on that the country so heavily dependent on its exports had little choice but to embrace globalization and open the country up to the world. Last year the volume of goods traded between Germany and China reached a staggering 170 billion euros. To put that in context, in 2016 the total value of goods and services traded between the UK and China was 15.5, was 13 billion euros. So Dr. Liam Fox, you have your work cut out there. And while Merkel remained open new markets for German exports she also remained unapologetic about Germany's foreign trade surplus for which of course she was attacked almost everywhere she went. On the other hand, back home there were a number of issues that haven't been addressed. Social inequality is on the rise. The lowest paid 40% of German workers earning less in real terms today than they earned 20 years ago. The use of food banks has increased. The tax system remains excessively complicated. Red tape frustrates builders and entrepreneurs. I found this very interesting figure. On average it takes 10 and a half days to start a business in Germany now. In Britain it's only four and a half days. I'd be interested to hear what the figure for Ireland is. State investment in infrastructure is limited by an overly rigid debt break. The net value of German infrastructure has fallen under her watch. The country's broadband speed has fallen from 12 to 29th in the world. New industries like the Internet of Things and Electric Cars are underdeveloped. Social cohesion between East and West remains a serious issue. The integration of immigrants is not working well. It's an issue that is left to notoriously cash-strapped local authorities and the third sector, which has the result that, for instance, in Berlin there are still 10,000 refugees in temporary accommodation who have lived there for the last two and a half years. And that's one of many examples like that. Pensions in social care remains a serious issue. Pension age was reversed under her watch. Cut for some workers to 63 years old. And so you wonder, is she really the person to sort out these issues she hasn't sorted out in the last 12 years? Merkel was a word that's been added to the German dictionary. It means to put off big decisions by doing and saying very little. She's a dithera. Add to that that she's unlikely to serve a full term. Chances are that she will give up the leadership of the CDU party conference in December next year, which in turn will set in motion the search for a successor. And after the best part of the generation at the top of the party that process will invariably be akin to a renewal. So in other words, German politics, her party will be distracted by that. And on the whole I think you could argue that her chancellorship has been much more about the grand gestures. Saying yes we will bail out Greece and leaving it to others to sort of decide how to do that. Opening the doors to the refugees without really thinking about the consequences. Announcing the so-called energy vendor, that crucial moment when she decided that Germany would leave nuclear power. All these things were about gestures and not about the nitty gritty of politics. So she's unlikely to tackle any of these issues that are just outlined in the way that they need attention. And I think that's where the AFD comes in. Making the country more open and liberal as she did, it also meant that the CDU moved away from the conservative Christian roots towards the political center and left the arch-conservative voter base seeking a new political home. Alienated by a handling of the Euro crisis and the migration crisis, 1.4 million voters abandoned their support for the CDU in favour of the AFD. And while there are some reasons to support the idea that the AFD will, as a party, will self-destruct in the next few years, for instance, it is a party that is anti-globalization and, of course, follows the instinctively right-wing agenda, anti-LGBT rights. But then again, it has a party leader, Alice Weidel, who's a former Goldman Sachs banker and lives in the same sex partnership. Now, if you have that as a party leader, it's difficult to see how you develop policy programs that are opposed to globalization and liberal human rights values. Equally, the party with a vice chairman at the age of 76, the party has no pension or social care policies either. And Gowland spent the last 40 years in politics as a member of the CDU, and it's interesting to see what he wants from this party, how he sees the AFD. He insists he wants to return to the days when, quote, the Bundestag was the heart of German democracy beating to the rhythm of roaring debates led by political beasts like Konrad Adenauer, Ludwig Erhardt and Willi Brandt. Now, that's great, but it's perhaps a bit nostalgic. But equally, what's equally possible is that while the AFD may well self-destruct the sentiment of its voters, the criticism of the voters of those people who have voted AFD will not only not go away, I think Merkel's inability to tackle the issues that need tackling will only increase the pool of voters who feel dissatisfied and left alone by the political establishment. And in that sense, the AFD, in whatever guise, will grow exponentially in the future.